The worst possible scenario for the Government’s Budget position, Treasury and the RBA’s growth forecasts is one where the Australian economy is slowing and the Aussie dollar should be adjusting lower.
On Friday, RBA Governor Glenn Stevens said he’d like to see the Aussie dollar lower, which has sparked some talk of possible RBA intervention.
While possible, the likelihood of that seems remote.
The problem is that the Fed and the US argument over the debt ceiling and near-default has once again seen money managers question where they should park their cash. With solid overall economic fundamentals, a great central bank and almost impenetrable AAA rating, Australian stands out again as the destination of choice.
Euromoney ran an article quoting Neil Mellor, currency strategist at BNY Mellon, the world’s largest custodian bank:
There has been a growing disillusionment with the dollar among reserve managers that has prompted a quest for alternatives en route to a longer-term goal of ending dollar reserve accumulation altogether… We have therefore suggested that the Australian dollar, along with a range of other currencies, must be considered a natural target for reserve managers.
This a repeat of the conditions and sentiment that drove the Aussie dollar to 1.10 in 2010.
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